Some models are based around an assumption of price movements being normally distributed, or Gaussian. For example, if a price has moved from a base by 3 standard distributions, based on statistical princples and assuming that price movements are normally distributed, it is unlikely to move further but revert to the mean.
However, if you actually chart price movements, you will find that they have a distribution. There are a lot of large up and down price movements. If you build a model based on normal distributions, it is likely that you will suffer significant losses.
ForexGen traders use fundamental analysis, technical analysis, quantitative analysis and sometimes a combination of all three to make their trading decisions. Fundamental analysis involves the use of economic, financial and political news to determine trading decisions. Technical analysis involves the study of Charts to predict future price movements based on past price patterns and trends. Quantitative analysis consists of the use of preset statistical models and properties in quantifying price formations such as averages, ret cements as well as identifying oversold and undersold situations.
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